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Western Europe & Israel: July 2003

EVCA urges revision to international accounting standards, better times ahead for European IPO market, Permira reaches first close at over E3bn, Deutsche Bank sells $500m private equity portfolio to CSFB's secondaries business…

Global Asset Capital, Hamilton Lane finalise takeover of Viventures
US private equity firms Global Asset Capital and Hamilton Lane have finalised their takeover of French venture firm Viventures, an offshoot of the debt-troubled Vivendi. Terms of the deal were not revealed but it includes all of the firm's 54 portfolio companies and the $400m it has under management. GAC and Hamilton Lane said they had been attracted to the business because of their optimism about the European private equity industry and France in particular. Viventures will be the platform for the development of their ambitions in the region, they said.
AltAssets 17.7 03

Siemens sets up Finland office to invest in mobile technology start-ups
Siemens Mobile Acceleration, a subsidiary of Siemens Information and Communication Mobile Group, has set up an office in Finland. It will invest seed and start-up capital in mobile technology start-ups. The Siemens Accelerator provides E1m to E5m in seed financing to start-up companies. It intends to make about ten investments a year.
Real Deals 3.7.03

UK private equity industry holds up well in 2002
UK private equity investments held up well in 2002, despite the difficult overall market and trading conditions and lack of exit routes, according to the British Venture Capital Association's (BVCA) annual Report on Investment Activity. Nearly 1,500 companies were financed in 2002 and the overall amount invested by UK private equity firms reached almost £5.5bn. This represents just a nine per cent reduction in terms of investment volume from the previous year. Over half of companies backed in the UK continue to come from technology sectors although the number of investments in the industry fell slightly from 2001. 641 technology companies were financed compared to 690 last year. Not unexpectedly, fundraising suffered in 2002 with funds raised totalling £7.8bn, down 43 per cent from the all-time record set in 2001 of £13.6bn.
AltAssets 3.7.03

Deutsche Bank sells $500m private equity portfolio to CSFB's secondaries business
Deutsche Bank has sold a $500m private equity portfolio to Credit Suisse First Boston's secondaries business as part of its ongoing strategy to scale back its exposure to the asset class. The move comes after the E1.5bn buy-out of DB Capital Partners, the bank's late-stage private equity portfolio in February and the securitisation of a further E500m in recent months.
AltAssets 29.7.03

Israeli venture sector shows tentative signs of recovery in second quarter
Investment in Israeli technology companies increased again in the second quarter, reinforcing tentative signs that the venture sector is undergoing a fragile recovery. The IVC Research Center said 86 companies raised a total of $271m in the second quarter, compared with $211m in the first and $205m in the fourth quarter of 2002. The latest figure is still below the $291m invested in the same period of last year and only a fraction of the peak recorded in the third quarter of 2000 when more than $1bn was raised. It does suggest, however, that the general situation has stabilised.
AltAssets 16.7.03

LCF Rothschild holds first close on French mid-market buy-out fund
LCF Rothschild Capital Partners, a private equity firm sponsored by Edmond de Rothschild Group, has held a first close on its debut fund. The mid-market French buy-out fund has received E87m of commitments. The Edmond de Rothschild LBO fund was launched in October last year and is targeting E200m. The level of commitments secured at the first close is well above expectations, the firm said in a statement. The LCF Rothschild group has committed E30m towards the fund's first close.
AltAssets 30.7 03

GE brings debt boost to European venture capital industry
GE has boosted Europe's venture market by opening a London branch of GE Technology Finance, which provides debt to technology companies backed by venture capitalists. The business allows early-stage private equity firms to introduce debt into their portfolio companies. The firm typically makes investments of between E500,000 and E5m. US firms have used this service to enhance returns for some years but in Europe there are only a handful of businesses that fill this niche.
eFinancial 30.7.03

UK Terra Firma delays final close
Guy Hands' Terra Firma is to delay the final close of its buy-out mega-fund by seven months. The decision comes after Hands admitted that his debut independent fund might have to settle for a close significantly below its original E3bn target earlier in the year. The fund was originally due to close by June but the deadline has been extended to 31 January 2004.
AltAssets 7.7.03

BVCA reaches agreement with UK Inland Revenue to avert tax threat
The British Venture Capital Association has reached an agreement with the UK Inland Revenue to avert the threat that a large chunk of general partners' remuneration would become subject to income tax. The two parties have signed a ‘memorandum of understanding' to clarify the suggestion in this year's budget statement that carried interest would be treated as income rather than capital gains.
AltAssets 28.7.03

Swedish growth companies face funding crisis
Swedish growth companies are facing a funding crisis according to a report from Industrifonden (Swedish Industrial Development Fund) and Connect. The report found that 30 per cent of Swedish growth companies require external funding in the short-term in order to survive. Respondents' assessment of the situation as a whole was that Swedish growth companies had experienced zero growth in the year to February 2003.
Real Deals 17.7.03

Dutch pension fund PGGM posts small loss on private equity portfolio in Q2
Dutch public sector pension fund PGGM has announced a return on its investments for the second quarter of eight per cent, with private equity the only asset class to make a negative contribution to the total. Private equity, however, remains the strongest performing component of the fund on a five-year basis. The portfolio posted a negative return of 0.4 per cent in the second quarter and a negative return for the year to date of 1.9 per cent. Its five-year return, however, was 11.3 per cent, just ahead of a 10.9 per cent return on its real estate portfolio and comfortably ahead of the 6.6 per cent return on its fixed income investments.
AltAssets 18.7.03

Private equity firms account for 60 per cent of UK middle-market deal flow
Private equity firms currently account for 60 per cent of UK middle-market transactions, according to the Gresham monitor, a survey of UK middle-market companies. A shortage of trade buyers and the continuing vulnerability of the economic environment have created an ideal deal flow for private equity players, the report said. The survey reveals a return of confidence in future mergers and acquisitions activity, with 53 per cent of respondents expecting to undertake a transaction in the year ahead. This represents a significant increase from the 39 per cent recorded in January. Optimism about growth prospects among UK middle-market firms has also increased since the beginning of the year.
AltAssets 3.7.03

US Hicks, Muse sets out raising European fund without setting a target  US buy-out firm Hicks, Muse, Tate & Furst has set out raising a European fund without setting a specific target. The strategy appears to break with an established tradition, albeit one that has become increasingly awkward for funds struggling to attract capital in difficult market conditions. The firm's documentation simply says the size of the fund ‘is to be determined at the discretion' of its managers.
Bloomberg 29.7.03

EVCA urges revision to proposed international accounting standards
The European Private Equity and Venture Capital Association (EVCA) has urged revisions to the detail of proposed International Accounting Standards (IAS) to avoid unintended but damaging consequences for the region's private equity industry. The industry group said it was worried that IAS 27, which deals with consolidated financial statements and accounting for investments in subsidiaries, ‘poses a serious threat to the financing of EU companies through the private equity and venture capital industry'. EVCA said producing consolidated accounts in the way proposed by the standard was inappropriate for the structure of the private equity industry and would have the effect of delivering misleading financial statements.
AltAssets 21.7.03

Biotech overtakes IT for Cambridge cluster
Biotechnology has overtaken information technology as the key to growth for the research and development community that has grown up around Cambridge University in the UK. The Cambridge Cluster Report 2003 reveals that in terms of company formation, employment and investment, biotech rather than IT is set to lead the growth of the region into the future. Biotechnology companies raised £341m in the past three years, 44 per cent of all capital raised across the cluster. Some 88 separate deals took place in the biotechnology sector during this period. The next four largest sectors accounted for only 63 deals combined.
AltAssets 1.7.03

Israel experiences 70 per cent leap in volume of venture capital investments
The number of Israeli firms receiving venture capital investments increased by 70 per cent in the second quarter of 2003, according to the Kesselman & Kesselman PricewaterhouseCoopers' MoneyTree survey. Israeli early-stage companies raised $243m this quarter compared with $143m in the first quarter of the year. This also represented a 12 per cent increase when compared with the corresponding period in 2002.
AltAssets 29.7.03

Germany proposes investment fund reform
The German ministry of Finance has proposed changes to its investment fund formation and fund taxation laws to attract foreign investment funds and managers, including those from the private equity industry. The purpose of the reforms is to put Germany on a par with countries such as Luxembourg, the UK and Ireland, Europe's leading investment fund centres and to stem further flow of fund business away from Germany.
PrivateEquityOnline 25.7.03

First half European venture investment drops 55 per cent on year
European venture capital investment continued its downward slide in the first half of this year despite signs that technology public markets are staging a gentle recovery. The first six months saw E1.6bn invested in European companies, compared with E3.6bn in the same period of 2002, according to venture research firm Windmill. More than half the total was channelled into life sciences and software companies. The report said more than 100 software companies raised a total of E420m and about 80 life sciences companies raised E401m.
AltAssets 15.7.03

UK Inflexion announces first close at E50m
UK private equity firm Inflexion has announced the first close of its second fund, Inflexion Private Equity Fund 2 with commitments of E50m. The fund will invest in buy-outs at the smaller end of the UK mid-market and is targeting in the region of E100m. The fund's parent company committed E10m to the fund. Inflexion Private Equity 2 also received commitments from Martin Currie, Nordea Pension, London Merchant Securities and the fund's own management team.
AltAssets 23.7.03

BVCA issues new industry reporting and valuation guidelines
The British Venture Capital Association (BVCA) has announced tough new revisions to its Reporting and Valuation Guidelines. The decision has been made in response to demands from the government, pension funds, and the government-sponsored Myners report. The new guidelines are intended to encourage greater transparency and consistency in the way private equity is valued and reported. The guidelines will allow greater comparability of funds operating in different markets around the world. They will include provisions for a more robust and rigorous valuation process, improved valuation methodology for management buy-outs and more explicit guidance on what information should be reported to investors.
AltAssets 7.7.03

Pan-European buy-out fund Permira reaches first close on third fund at over E3bn
Permira, the UK-based pan-European buy-out firm, has announced a speedy first close on its third European buy-out fund at over E3bn. Just four months after launching, the fund now looks comfortably on track to hit and possibly exceed its E4.5bn target, which would make it the second largest European private equity fund ever raised. The Permira Europe III fund has so far attracted 65 investors. Half of these are investors are European, 40 per cent are from the US and ten per cent are from Asia. Some 72 per cent of investors have invested in previous Permira funds. SVIIT is the fund's largest investor with a E400m commitment.
AltAssets 24.7.03

Botts scales down latest fundraising efforts
UK mid-market private equity firm Botts & Company has scaled down its latest fundraising. The firm is thought to be restructuring its latest vehicle, BCP II, which had a E325m target when it was launched in June 2002. The firm originally planned to raise the capital by March this year, having secured a E100m cornerstone commitment from Bank of Scotland and pension management group Hermes.
Real Deals 3.7.03

UK Dawnay Day builds private equity interests with Morgan Grenfell hire
UK corporate finance boutique, Dawnay Day, is to boost its exposure to private equity with the launch of a new principal investments unit. The firm has recruited Luke Bridgeman from Morgan Grenfell Private to assist with the launch. The new division will invest in mid-market private equity acquisitions as well as building strategic shareholdings in UK listed companies.
AltAssets 11.7.03

Better times ahead for European IPO market, report says
The European market for initial public offerings may finally be turning a corner, according to the latest quarterly PricewaterhouseCoopers IPO watch Europe survey. But the market remains significantly below the levels experienced last year. In the second quarter of 2003 there were 23 IPOs on Europe's principal exchanges, a 64 per cent increase from the 14 flotations in the previous quarter. But the number of European IPOs in the last three months is still down 67 per cent from 70 in the same period of 2002. The total value of IPOs fell by 70 per cent from the second quarter last year. But despite the difference in total offering value, the average size of deal remains broadly in line with last year, E68m compared to E75m in the same period of 2002.
AltAssets 3.7.03

Swedish Bure sells interest in Nordic Capital funds
Bure Equity, the Swedish private equity firm, has agreed to sell all of its holdings in Nordic Capital's buy-out funds II, III and IV to an unnamed secondary buyer. Bure has invested in Nordic Capital's funds since 1993 but did not commit to the firm's fifth fund, which closed at E1.5bn earlier this year. The total consideration is expected to result in a net gain over book value of SKr146m. Bure's debt will also be immediately reduced to around SKr425m and then further reduced to SKr245m as the transaction is completed through three additional installments to be paid out over the next 12 months.
AltAssets 22.7.03

Spanish private equity investment falls in H1 2003 but growth expected by year-end
Spanish private equity investment in the first half of this year fell significantly from the second half of 2002 but was still 25 per cent above the levels recorded in the first half of 2002, according to the Spanish Venture Capital Association. Spanish private equity firms invested E415m in private companies in the first half of this year, compared with E630m in the second half of 2002 and E330m in the first half. A further increase in investment activity is expected for the remainder of the year, with the Spanish Venture Capital Association predicting a total value of private equity investments in excess of E1bn by year-end.
AltAssets 9.7.03

Bank of Ireland invests in Munster's first early-stage fund
Bank of Ireland has invested E6.4m in Cork-based Kernel Venture Fund, the first early-stage fund investing specifically in the Munster province. The fund held its first close in April last year at E12.5m. It will invest between E300,000 and E1.5m in early to mid-stage companies across a range of industries.
Real Deals 3.7.03

UK Cabot Square Capital closes second fund at E284m
UK-based Cabot Square Capital has announced the final closing of CS Capital Partners II at E284m. The fund has exceeded its original target of E250m.The fund received commitments from a broad range of institutional investors, including strong participation from university foundations and endowment funds in the US. The fund will invest in small and middle-market buy-outs and start-ups in the UK and Western Europe with a focus on the financial services, hospitality and leisure, and outsourcing sectors. The firm will typically make investments of between E10m and E50m in each deal.
AltAssets 4.7.03